A Capitalist Manifesto
JUNE 01, 1969 by WILLIAM HENRY CHAMBERLAIN
Mr. Chamberlin is a skilled observer and reporter of economic and political conditions at home and abroad. In addition to writing a number of books, he has lectured widely and is a contributor to The Wall Street Journal and numerous magazines.
More than a century ago, in 1848, Karl Marx and Friedrich Engels, on behalf of the Communist League, issued The Communist Manifesto, one of the most famous appeals for revolution. The following paragraph in the Manifesto sums up the communist objective in a nutshell; and this objective has been realized, in varying degree, in the Soviet Union, mainland China, Cuba, and the Soviet satellite states in Eastern Europe:
"The proletariat (wage working class) will use its political supremacy to wrest, by degrees, all capital from the bourgeoisie, to centralize all instruments of production in the hands of the state, i.e., of the proletariat organized as the working class, and to increase the total of productive forces as rapidly as possible."
To put this in somewhat more understandable language: The wage working class will seize governmental power and confiscate all property from its owners. The state will then proceed to operate factories, mines, transportation systems and endeavor to raise production levels as rapidly as possible.
The Manifesto is phrased in rather melodramatic language. It begins with the assertion that the specter of communism is haunting Europe, asserts that history can only be understood as a succession of class struggles in which slave society gave way to feudalism and feudalism to capitalism. Capitalism, in turn, must give way to a higher form of society: socialism or communism. Marx used these two words interchangeably. The communist ideal includes such points as the abolition of private property in land; a heavy progressive or graduated income tax; abolition of all right of inheritance; centralization in the hands of the state of industries, means of communication and transport, and credit; and universal liability to labor. The opposition of communists to the existing order is emphasized in the concluding sections of the Manifesto:
"The Communists everywhere support everywhere every revolutionary movement against the existing social and political order of things….
"The Communists disdain to conceal their views and aims. They openly declare that their ends can be attained only by the forcible overthrow of all existing social conditions. Let the ruling classes tremble at a communistic revolution. The proletarians have nothing to lose but their chains. They have a world to win.
"WORKINGMEN OF ALL COUNTRIES, UNITE."
Vision of the Future
The Communist Manifesto is a call to revolutionary action. The comforting assurance that such action is in line with historical destiny is to be found in one of the few vividly imaginative passages in Marx’s major work, Capital. In general this work is so heavily interlarded with early nineteenth century British economic theory and the philosophical ideas of Hegel, which Marx twisted and applied to his own purposes, that only the most persistent and devoted communists and socialists can honestly boast of having read it through. In this passage, however, Marx gets away from his customary ponderous long-winded style and sets forth the essence of his doctrine and his vision of the future:
"While there is a progressive diminution in the number of the capitalist magnates, there occurs a corresponding increase in the mass of poverty, oppression, enslavement, degeneration, and exploitation. But at the same time there is a steady intensification of the wrath of the working class—a class which grows ever more numerous, and is disciplined, unified, and organized by the very mechanism of the capitalist method of production. Capitalism becomes a fetter upon the method of production which has flourished with it and under it. The centralization of the means of production and the socialization of labor reach a point where they prove incompatible with their capitalist husk. This bursts asunder. The knell of capitalist private property sounds. The expropriators are expropriated."
Here is a vision to tempt the eyes of advocates of revolutionary change, whether they favor peaceful or violent methods. It has all the appeal of an epic drama. There is a villain, the capitalist exploiter; a hero, the downtrodden proletariat; and there is an allegedly scientific assurance that the hero will win. For, if the rich become fewer and richer and the poor more numerous and more miserable, the long-range odds for social change are clearly on the side of the poor.
Unfortunately for Marx’s reputation as a prophet, what he represented as infallible laws of historical development proved by the course of events to be mere arbitrary guessing about the shape of things to come—and pretty bad guessing, at that.
Take the very keystone of the Marxist theory: the dogmatic assurance that the rich will become fewer as they gather more wealth into their predatory hands, while the poor wage-working "proletarians" become constantly poorer, more degraded and oppressed. (Incidentally, Marx and his collaborator, Friedrich Engels, never made clear how and why a long process of poverty and exploitation fitted and qualified the proletariat to rule.)
But it is a matter of visible record, which could be supported by mountainous statistics, that it is in just those countries where the capitalist system has been most faithfully preserved that the industrial wage-workers have achieved the most impressive gains in real wages, in food, clothing, housing, educational and employment prospects for their children, in everything that goes to make up a standard of living.
Even in Marx’s lifetime, in the middle and latter part of the nineteenth century, the poverty of the industrial workers in the country he knew best, England, was diminishing. Could the socialist prophet revisit London where he spent so many weary hours poring over government reports on industrial conditions, he could scarcely fail to be amazed at how living conditions in London’s East End and other industrial areas had improved, by the number of new items in the working class family’s budget. And this improvement was general in all advanced industrial countries where capitalism was allowed to function.
Indeed Marx, the supposedly scientific prophet of the world’s economic future, has been proved completely wrong on many important points of his creed. The most significant, perhaps, of his mistakes was about the increasing poverty and misery of the wage-working class. Another conspicuously bad guess was about the regular evolution from one type of social-economic organization to another. Marx was convinced, and the idea recurs frequently in his writings, that a higher form of society would only emerge when all the possibilities of the preceding lower form had been exhausted.
In other words, only a country that had passed through a long development of capitalism would be ripe and fit for a socialist transformation. A socialist revolution before capitalism had reached maximum development would be a sin against Marxian theory —indeed, according to this theory, could not occur.
The Improbability of Communism in Russia and China
Once again Marx failed as a forecaster, and on two counts. The highly developed capitalist countries that should, by Marx’s rules, have been ready for the transition to socialism or communism, the United States, Great Britain, Germany, showed no inclination to take this road. The communist revolutions that occurred—in Russia in 1917, in China in 1949—took place in countries where according to Marx no such upheavals should have occurred.
Indeed, in Russia one of the principal arguments between the Bolsheviks—who pushed the revolution through and quickly turned the supposed rule of the Soviets into the rule of the Communist Party and substituted a dictatorship over the proletariat for the Marxist ideal, dictatorship of the proletariat—and the more moderate Mensheviks was about Russia’s suitability for a socialist revolution. From the standpoint of Marxist dogma, the Mensheviks had the better of the argument; Russia was in a very early phase of capitalist development and certainly had not exhausted the possibilities of this phase. But the Bolsheviks had the stronger practical arguments: the guns, the swift organization of a system that made the expression of any contrary views impossible. They made a revolution in the name of Marx in violation of some of Marx’s basic and most cherished convictions.
Even more striking was the unsuitability of China for application of Marx’s blueprint of revolution, which assumed a highly developed industry and a large class of organized industrial wage-workers. Outside the large cities, much of China was in a pre-capitalist state of economic development, far behind Czarist Russia. About the collectivist revolutions of the twentieth century, the Russian and the Chinese, there may be many opinions; but one fact is clear. Although both were made in the name of Marx, neither fitted Marx’s prescription of socialism as an organic growth, with more or less violence, from the supposedly lower stage of capitalism.
Marx had thought of capitalism as carrying the seeds of its own destruction. Whenever nineteenth century England experienced an economic setback, Marx and his friend Engels exchanged joyful letters about the impending doom of the hated capitalist system. But in England, as in the United States and other countries, there was invariably a recovery from depression; and not only a recovery but a surge to new heights of production.
During Marx’s lifetime and during the interval between his death and the outbreak of World War I there was no sign of the death of capitalism from what might be called internal disease. There was a considerable growth of socialist parties in Europe; but these parties showed an increasing tendency to seek their objectives by evolutionary and peaceful methods. Violence came into play in poorer and socially more backward countries. And, when the workers of Europe faced the choice between loyalty to nation and loyalty to class, on the outbreak of general European war in 1914, the overwhelming majority followed the call to the colors.
Extreme internationalists who followed Lenin’s slogan, "Turn the imperialist war into civil war," were a negligible minority. Even in Russia, where political assassination, mass political strikes, military and naval mutinies had figured in the struggle against an autocratic regime, the first impulse after the outbreak of hostilities was toward national unity.
As the war went on, with its lengthening casualty lists, its uprooting and dislocation of vast numbers of people, its growing privations and sacrifices, this early enthusiasm vanished. The war was an important factor in bringing about successful revolution in Russia, revolts and riots in other countries. And World War II had much the same effect in China as had World War I in Russia. The communists were the only winners. But this was not according to Marx. Both in Capital and in the more succinct Communist Manifesto, revolution is seen as the end product of internal weaknesses in the capitalist system, not of an external force like war.
The Superiority of Capitalism
The Communist Manifesto is based on assumptions that are, in some cases, unproved, in other cases disproved by the course of historical development. It is time that some individual or group put forward a Capitalist Manifesto, affirming faith in capitalism as the best, fairest, most efficient and humane method known to human experience for getting the world’s work done, especially in the light of the contrasted example and lessons of its collectivist challenger. Such a Manifesto would state six reasons for the superiority of capitalism, based not on doctrinaire theories and dubious assumptions, but on the clear teachings of human experience:
(1) Two examples at opposite ends of the world, Germany and Hong Kong, prove the magic of capitalism in restoring a shattered economy or creating a flourishing oasis of industry and trade which had not existed on anything like the same scale before. The recovery of Western Germany from hunger, ruin, and apathetic despair after Dr. Ludwig Erhard prescribed his medicine of prosperity through hard work, competition, individual incentive, and return to maximum freedom of trade, was so spectacular that it is still often referred to as the German miracle. To move across the frontier to communist-ruled East Germany was, as a German once said to me, like the transition from day to night.
Hong Kong is a bare island with an adjacent strip of mainland, a leased acquisition of Great Britain after one of its nineteenth century clashes with China. The city has grown enormously since the end of the war, mainly because of the influx of refugees from the communist-ruled mainland. Four million people are now crammed into this small area. Here is the comment of a recent visitor, the American journalist, William L. White:
"The little city is prosperous beyond belief. This surviving vestige of British colonialism shows what free trade can do, if it is left free."
In history and ethnic make-up Hong Kong is very different from the German Federal Republic. But both teach the same lesson: the enormous built-in dynamic of capitalism. Incidentally, Hong Kong is one place where the native population emphatically does not want the British to leave.
(2) Freedom from monopoly saves the capitalist system from hardening of the economic arteries. If one firm turns down a promising scientific or managerial invention, another firm may take it up, and take the lion’s share of the market with it.
One of the least convincing arguments for socialism is the occasional appearance of monopoly abuses under free enterprise. But monopoly abuses under capitalism are transitory and self-correcting, if not induced and sustained by government grants of power. Under socialism, or communism, where the state is the sole producer and distributor, these abuses are permanent and irremovable. What an illusion, to imagine that the cure for the evils of monopoly is more monopoly!
It is highly significant that it is always the communist-governed countries that are trying to learn from the more advanced capitalist lands. It is never the other way around. In recent years communism has been paying capitalism the proverbial flattery of attempted imitation by experimenting with such capitalist devices as differential wages, emphasis on profits for state enterprises, and so forth. But these feeble imitations will not lead to success, it may safely be predicted, so long as the essential ingredients of private ownership and private profit are missing.
(3) Far from being reactionary and tyrannical in its effects, capitalism—with its diffusion of economic power among millions of owners and investors, large and small—is the only system compatible with the checks and balances, the freedom of the press, the holding of free elections, and the legal guaranties against arbitrary actions of state authority that make up the essentials of a free society. Communist regimes have been set up in various countries and under various circumstances. But it is surely significant that not one of these states can pass the free election test, where various candidates may compete with the spoken and printed word, and without fear of the policeman’s knock as a result.
A generally capitalist economy is no guaranty of political freedom. The scope and reality of free political institutions vary from country to country depending on such factors as political experience, education, and others. But one infallible way of assuring the elimination of any trace of control by the citizen over the state is to set up a communist economy and thereby make the state, and the people who operate that state, the monopolistic possessors of economic power. That is a rule to which there have been no exceptions.
(4) Anyone who cherishes freedom should be a convinced upholder of the capitalist, or individualist, economy. For freedom is in the very nature of capitalism, as compulsion is an integral aspect of an attempt to put Marx into practice. The degrees of pressure on the individual in a collectivist society to do what the state dictates, rather than what he may choose to do or not, vary from the frightful brutality of slave labor concentration camps to milder methods. But the pressure is always there. Not the least of the merits of capitalism is that it leaves the individual alone, to work at whatever may attract him, to be a hobo or a hippie.
(5) Capitalism is a no utopian system. It does not promise the earth, the moon, and the stars to those who live with it. It does promise them freedom to choose between material and nonmaterial objectives. It assures them that, subject to vicissitudes and accidents which are in their nature uncontrollable, they will go as far, by and large, as their abilities, diligence, and aptitude will carry them. Not to be utopian may seem a rather negative tribute. Yet it is doubtful whether more or less consciously evil men have inflicted as much suffering as have utopian idealists, enjoying a period of absolute power and prepared to turn life into a hell for the present on the doubtful prospect that it may be a heaven for future generations.
(6) There is a widespread feeling that, while capitalism may be useful and efficient, it is somehow sordid and lacking in moral inspirational appeal. But on a closer view, a philosophy that has given the world the wonderful device of the free market, that makes possible the checks and balances on which a free society depends, that diffuses economic power as a free society diffuses political power, that avoids the cruelties of compulsion and the illusions of state planning, that steers clear of utopianism—such a system is by no means lacking in moral appeal, especially if one fairly examines its alternatives. In that connection, worth remembering is a saying of the late Wilhelm Röpke, one of the most brilliant exponents of economic freedom as indispensable for all other kinds of freedom:
"While the last resort of the competitive economy is the bailiff, the ultimate sanction of the planned economy is the hangman."
EDITOR’S NOTE: The Exploitation Theory by Eugen von Böhm-Bawerk is a scholarly analysis and exposé of the fallacy underlying the Marxist writings. Published by The Libertarian Press, the booklet is also available at $1.50 from the Foundation for Economic Education, Inc., Irvington-on-Hudson, New York, 10533.